Do you want to buy a home but don’t have enough money for the down payment? Don’t let this be a barrier to getting your dream home.
Instead, learn about different mortgage options if you intend to finance the purchase, as buying a new home is the most significant expense of your life.
Also, not all home loans are created equal, and knowing which type of loan works best for your specific situation is important.
Generally, loans with a longer term will cost more in interest but will have lower monthly payments than those with a shorter term. The exact amount of difference that the length of the loan will make in terms of interest costs and monthly payments will depend on the loan terms and interest rate.
Here are some mortgage loan types you should know.
A Conventional 97 mortgage is a type of low down payment mortgage offered by Fannie Mae. It allows first-time homebuyers to put down only 3% of the purchase price and requires a minimum credit score of 620.
The loan features a fixed-rate and is available to all income levels. The loan does not require any private mortgage insurance. Additionally, the borrower must occupy the home as their primary residence.
If all of the occupants of a home being purchased with a loan-to-value (LTV) ratio higher than 95% are first-time homebuyers, then at least one of them must receive homeownership education in order to qualify for the loan. Fannie Mae HomeView™ is an acceptable way to fulfill this requirement.
HomeReady is a low-down payment mortgage offered by Fannie Mae and designed for low- and moderate-income borrowers.
This loan program allows borrowers to qualify for a mortgage with a down payment as low as 3 percent, which can come from the borrower’s own funds or from other sources such as a family member, employer, or government program.
The loan also offers flexible underwriting requirements and allows for a higher debt-to-income ratio than traditional loans.
Income eligibility limits of borrowers are based on the median income of the census tract where their property is located, and the limits meet Fannie Mae’s regulations to support low-income borrowers.
Home Possible Loan is a type of mortgage loan offered by Freddie Mac to help low and moderate-income homebuyers become homeowners. It is designed to provide financing for borrowers who may not qualify for traditional financing.
The Home Possible loan offers a lower down payment and closing costs and flexible underwriting. Borrowers must meet certain criteria such as income, debt-to-income ratio, and credit score, as well as other requirements.
The loan is available for both single-family and two- to four-unit properties. This loan is a great option for borrowers who may not qualify for a traditional loan due to limited funds or credit history.
By using Freddie Mac’s loan programs, borrowers can benefit in the following ways:
Government-backed mortgages are loans that are insured by an agency of the federal government. This means that, if you have trouble making payments or default on the loan, the government will step in to help.
There are three types of government-backed mortgages that homebuyers can explore:
Each of these mortgages has its own set of benefits and requirements, so it’s important to do your research to find out which one is best for you.
In some cases, government-backed mortgages can make it easier to qualify for a loan than with a traditional lender. If you’re considering buying a home, understanding the different types of government-backed mortgages can help you make the right decision.
Since 1934, the Federal Housing Administration (FHA) has been helping people become homeowners.
You’re probably asking yourself how does the Federal Housing Administration (FHA), which is a part of HUD, make it possible?
By insuring the loan, lenders can offer borrowers more attractive options such as low down payments, low closing costs, and easier credit qualifications.
According to FHA, As of September 30, 2021, the Federal Housing Administration (FHA) had active insurance on 7.8 million single family forward and reverse mortgages, with a combined unpaid principal balance of $1.2 trillion.
This makes homeownership more accessible and achievable for potential buyers who may not have qualified for a loan otherwise.
An FHA mortgage may also offer flexible terms and more lenient qualification criteria, making it easier for those with limited assets or income to secure a mortgage.
USDA mortgages are government-backed loans offered by the United States Department of Agriculture (USDA). These mortgages are designed to help low- and moderate-income families purchase homes in rural areas.
The loans are offered through local lenders and are guaranteed by the USDA. These mortgages typically require no down payment and feature competitive interest rates. They also allow borrowers to finance a wide range of home improvements and repairs, making them attractive to first-time homebuyers.
A VA loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs (VA). The loan may be issued by qualified lenders. The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry).
The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment.
The VA loan allows eligible veterans to purchase a home with no money down and with a competitive interest rate. The VA loan also requires a one-time funding fee, which can be added to the loan amount.
The main pillars of the VA home loan benefit include:
A government-backed loan could be the perfect way for you to reach your homeownership goals, especially if you’re a first-time home buyer.
These loans offer lower credit requirements, making them an ideal financing option. With a government loan, you can finally become a homeowner and make your dreams a reality.
Ready to see how much you can qualify for? Apply today!
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